US imports of Chinese solar panels could drop by half this year as a result of the US Commerce Department ruling that slaps a tariff on imports, says market research firm, IHS, Inc.
That would raise prices, quickly deplete inventories and impact project timelines, they say in the report, IHS iSuppli PV Perspectives.
Because of the ruling, Chinese solar manufacturers are suspending shipments - as much as 1.5 gigawatts (GW) or 45% of the total US market in 2012 - while they modify business plans to absorb or avoid the tariff.
Before the ruling, IHS estimated that 2 gigawatts (GW) of solar modules would be shipped to the US this year from China, representing 60% of the North American market.
"The Commerce Department action will have a major impact on the North American solar market, constraining supplies and driving up prices for modules and systems," says Mike Sheppard, photovoltaics analyst with IHS. "Even when alternative supply lines are adopted, the penalties are likely to add as much as 12 percent to the cost of solar modules, lowering the average return on investment (ROI) for solar systems in the region by as much as 2.5 percent."
Even if Chinese manufacturers choose to sidestep the tariff - which ranges from 34%-250% depending on the company - their costs will rise 10-12% by outsourcing component manufacturing or assembly to Taiwan. Only the final solar panels are charged a tariff.
If they outsource to Taiwan, module prices would be affected more than full solar systems, whose price also depends on inverters, racking and other components. For systems, solar panel prices would rise less than 10 cents per watt, from $2.56 per watt today to $2.65 per watt, says IHS.
As a result, the return on investment for solar installations is expected to decline by 1.5-2.5% if they outsource, which wouldn't deter most investors.
But the point of the tariff is to level the playing field for American solar manufacturers, which will likely fill in any gaps.
The tariffs are preliminary and will be finalized by both the Commerce Department and International Trade Commission on October 9 and November 23 of this year respectively. But solar companies have to issue a bond on the tariffs retroactive for 90 days before the preliminary decision in the event they are finalized.
Here are the details of the US Commerce anti-dumping ruling: